Investing versus Trading and the California Gambling Bill

Investing versus Trading and the California Gambling Bill – Zynga

January 11, 2013

This is a copy of our Weekend Updated mailed FREE to our subscribers every Friday.

 I would like to discuss the difference between “Investing” and “Trading” and what my Investment Newsletter sets out to accomplish.

Investing traditionally refers to people who are willing to allocate investment capital with the expectation of earning a rate of return on that investment over a long period of time. Many investors make the initial investment and then just put their head in the sand and hope for the best.

Trading is usually characterized by buying and selling stocks within the same day where the holding period is often seconds or minutes. Trading is at the other end of the spectrum from investing. Most traders have no long-term bias and they usually change direction many times throughout the trading day.

I strongly believe investors in the 21st century must be some place between putting their head in the sand and directionless day trading.

Here is my case for “why I trade my way into and out of investments” as I believe every investor involved with the stock market in the 21st century should do.

30+ years ago computers came with very small amounts of computing power (remember the Commodore 64) measured in kilobytes – megabytes of memory were outrageously expensive, a gigabyte was only a dream and terabytes were an impossibility. Today, we walk around with smart phones in our pocket utilizing gigabytes of memory and we can buy terabyte hard drives for a $100. The pace at which computing power has grown is parabolic.

In addition, world wide business news organizations didn’t exits 30 years ago. CNBC did not exist until 1989, Bloomberg was started in 1986 and Google started in 1998.

The advancement in computing technologies and the development of worldwide business news organizations have transformed the way economic information is disseminated throughout the world. Think about it – in the 60′s and 70′s people had to call each other on the phone or wait months to get new information published in a nationally syndicated professional journal. No email, no text, no business television and no Google.

Today when new economic news is released – within SECONDS – it’s known throughout the world. New information is almost instantaneously factored into every economic model on the planet. Which in turn causes rapid swings in the stock market outlook and exceptionally quick repricing of investments.

Charts of the stock market indexes 30+ years ago looked like rolling waves in the ocean, reflecting the slow absorption of new information into economic models. Now if you compare older stock market charts to a chart from the last 10-15 years what do you see? You see massive swings up / down 20%-40% (sometimes more) in months not years. Charts today look more like sharp pointed mountain tops than a rolling peaceful sea. A startling change from decades ago.

So if economic models are updated instantaneously why shouldn’t your investment strategy?

Technical analysis provides the individual investor the ability to adjust their investment strategy before the fundamental analysis is known. As an individual investor you may not instantaneously know how a new natural gas discovery in Australia effects your investment in a natural gas company based in North Dakota but you can watch the stock chart.

In effect because of the new technology and speed of information the stock chart reflects consensus (right or wrong) instantaneously. This information can then be interpreted using technical analysis. Technical analysis tends to precipitate fundamental information.

This is exactly what my Investment Newsletter achieves by utilizing fundamental and technical analysis to produce higher investment returns.

 As I mentioned within the Weekend Update on December 28th Zynga has filed an “Application for a Preliminary Finding of Suitability” in Nevada. This week I thought I would note a new California Internet Gambling Bill.

This bill, published on December 19, 2012 (can be seen here), uses the words “urgency and to take effect immediately”. California is broke and is always looking for ways to increase tax revenue. The state already collects taxes on marijuana sales so why not online gambling? If you own Zynga you should pay attention to this bill. Almost 40 million people live in California and the approval of such a bill would be exceptionally good news.

 Nautilus Minerals was a fantastic investment – a record for me. The model portfolio made about 105% on our investment in 5 weeks on buyout rumors / discussions. A super way to start 2013!

 Welcome new members – Archived copies of the Weekend Update can be seen here

Weekend Update – Archive

 Few position updates noted below – Have a good weekend.

Jim@RulingTheMarkets.com

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Zynga (ZNGA)

Zynga, ZNGA, stock marketFull allocation – average cost $2.46
Recent Price $2.56 – Investment performance  +4%


This week – see comments above.

Company Description

Zynga, Inc., is a company that provides online social game services. The Company develops online games designed for play on social networking sites. It has more than 240 million monthly active users playing its games, which include CityVille, Zynga Poker, Draw Something, Hidden Chronicles, FarmVille, CastleVille, Words With Friends, Empires and Allies, Scramble With Friends, Cafe World, The Pioneer Trail, Indiana Jones Adventure World and Mafia Wars. Zynga’s games are available on a number of global platforms, including Facebook, Zynga.com, Google+, Tencent, Apple iOS and Google Android.

YPF SA (YPF)

Half allocation remaining – average cost under $10.20
Recent price $14.90 – Investment performance +46%
Sold 1/2 of our investment for a 44% gain


This week – Technically the stock is consolidating the gains from the past 8 weeks very bullishly.  A break above the $15.90 area would be fantastic.

Company Description

YPF – is an Argentina-based integrated oil and gas company. The government of Argentina took control of the company away from Repsol early this year. The political risk surrounding his investment is VERY HIGH however, the assets are REAL. The company controls one of the largest new oil discoveries on the planet.
The stock has fallen from $55 to $10 in about 18 months on the political uncertainty. I am getting in after 90% of the government “BS” is done.

Sequenom (SQNM)

Quarter allocation remaining - average cost under $3.80
Recent price $4.25 – Investment performance +12%
Sold 3/4 of investment for a gain of 30+% this week.


This week – Technical analysis gave a HUGE sell signal.  Realized gains of over 30% in just over 2 months.  Only 25% allocation remaining – hold for now.

Company Description

Sequenom, Inc. provides products, services, diagnostic testing, applications, and genetic analysis products that translate the results of genomic science into solutions for biomedical research, translational research, molecular medicine applications, and agricultural and livestock research.

Gold Member recommendation December 2012

Gold Membership Full allocation –  recommendation published on Dec. 7th.
Investment performance +5% – Stay the course.

No changes to the investment thesis.


Gold Member recommendations will not be mentioned for  90 days from the publication date.  Become a Gold Member here right now.

Here is a teaser from the December 2012 report -

Production of natural gas is “booming” in the U.S. and natural gas fields are being discovered and developed throughout the world.  The largest weakness of natural gas is its gaseous state.  Liquids are much easier to move from point A to point B.  This company is an expert in handling natural gas and their technology allows for the economic transportation over long distances.  This cost effective transportation gives companies the ability to take advantage of the worldwide pricing imbalance for natural gas.

This imbalance is the investment opportunity of the future.  As natural gas is transported from high supply locations with low prices to low supply locations with high prices, effectively arbitraging the price differential between worldwide locations, companies have the potential to make billions and billions of dollars.

Gold Member recommendation #1 January 2013

Gold MembershipFull allocation – recommendation published on Jan. 2nd.
Investment performance +Nil – Stay the course.

No changes to the investment thesis.


Gold Member recommendations will not be mentioned for  90 days from the publication date.  Become a Gold Member here right now.

Here is a teaser from the January 2013 report -

The Story…

I need an investing thesis or story when I look at potential investments.

A thesis is important for a few reasons. First, a well thought out thesis forces the investor to organize their analysis in a logical manner which produces a conclusion – to invest or not. Secondly, it serves as a benchmark from which to analyze all future information. Thirdly, it includes technical analysis – when to buy, what price to pay, how much to risk, what is the potential return, when to stay invested or when to get out.

The story of natural gas began to unfold 5 – 8 years ago when technological advancements occurred that allowed the extraction of natural gas (and oil) from unconventional sources like shale rock. This new technology has allowed natural gas to be extracted from locations not previously deemed economically viable. This cost effective technology has sent resource reserve estimates sky-rocketing all over the world as seen in the map ….

…. Oil is a solid so it can be easily transported via pipelines and ships to any place on the planet. On the other hand, natural gas, because of its gaseous state, is not easily transported large distances economically and therefore local supply imbalances occur. The local supply imbalance forces prices lower in areas of great supply as graphically illustrated below…..

Rosetta Genomics (ROSG)

Three-quarter allocation – average cost $5.30
Recent price $4.93 – Investment performance -7%


Small position – stay the course.

This week in a press release some positive result from a tumor study were documented.  The stock opened up 20% on the news and has since fallen back to support.  Top of my watch list for next week.  Any further weakness will be bearish.

Company Description

Rosetta Genomics Ltd. develops and commercializes a range of micro-RNA-based molecular diagnostic tests. It offers diagnostic tests, including miRview mets product for identification of the origin of the primary tumor of metastases. The company was founded in 2000 and is based in Rehovot, Israel.

On a recent conference call the CEO suggested the total size of the market for their approved RNA based tests was in excess of $500 million – not including the future market for “pipeline” tests being developed.

Nautilus Minerals (NUSMF / NUS)

No remaining investment
Sold investment this week for a +105% gain in 5 weeks


I have moved to the sidelines for now – watch list item.

Company Description

Nautilus Minerals Inc., an exploration stage company, engages in the exploration and development of the ocean floor for copper, gold, silver, and zinc deposits in Australasia. The company holds interest in Solwara 1, a seafloor copper-gold project located at 1600 meters water depth in the Bismarck Sea, Papua New Guinea.

Gold Member recommendation #2 January 2013

Gold MembershipFull allocation – recommendation published on Jan. 8th.
Investment performance +3% – Stay the course.

No changes to the investment thesis.


Gold Member recommendations will not be mentioned for  90 days from the publication date.  Become a Gold Member here right now.

Here is a teaser from the January 2013 report #2 -

Come and listen to a story about a man named Jed
A poor mountaineer, barely kept his family fed,
Then one day he was shootin at some food,
And up through the ground came a bubblin crude.

Oil that is, black gold, Texas tea.

Well the first thing you know ol Jed’s a millionaire,
Kinfolk said “Jed move away from there”
Said “Californy is the place you ought to be”
So they loaded up the truck and moved to Beverly.

Hills, that is. Swimmin pools, movie stars…..

The Story…

Most subscribers have figured out by now I believe the shale oil / gas revolution occurring within the United States is a big deal and probably one of the largest investment opportunities currently available. In past Gold Member Reports, I have detailed out my favorite infrastructure and transportation companies. Today I am going to discuss the “production” side of the equation.

After decades of declining domestic oil production, high international crude prices have provided the motivation to develop new drilling technologies for conventional and unconventional wells. Technologies like horizontal drilling; hydraulic fracturing and drill bit advancements have all worked in conjunction with each other to help make US exploration and production economically viable.

Many investors have heard of the shale oil / gas areas of the country experiencing rapid economic prosperity. Bakken in North Dakota, Utica and Marcellus in the Eastern United States and the Eagle Ford area in Texas – just to name a few….

Investing performance can be seen here

Trading and investing policies can be seen here